The Canadian Securities Administrators (CSA) on Thursday proposed a new rule that aims to address the problem of companies potentially misleading investors when they use non-standard measures in their financial disclosure.
According to a CSA notice, the current lack of transparency and consistency in the use of non-GAAP disclosures poses a problem for investors.
The proposed rule, which would replace existing CSA guidance in this area, aim to address this issue “by requiring comprehensive disclosures, including disclosure regarding a financial measure’s method of calculation and usefulness. Such disclosures are intended to help investors better analyze different financial measures within an industry or among different industries, ” the notice states.
The CSA’s proposal doesn’t introduce specific limitations on the use of non-GAAP measures, nor does it impose industry-specific requirements.
“Rather, [the proposed rule] includes comprehensive disclosure requirements whose overall goal is to improve the quality of information provided to investors,” the notice states..
The proposed new rule would “provide CSA Staff with a stronger tool to take appropriate regulatory action, when warranted,” says Louis Morisset, CSA chairman, and president and CEO of the Autorité des marchés financiers.
The proposed new rule is out for comment until Dec. 5.